A recent legal skirmish under a builders risk policy contains significant discussion about Georgia law allowing insurance companies to shorten the time to file a lawsuit. The trial court Order1 not dismissing the lawsuit despite a one-year limitation, and the brief of the policyholder are attached because they are worthy of study if you find yourself in a Georgia situation where the insurer is relying upon a statute of limitation defense.

Shane Smith noted Georgia’s limitation rule when applied to insurance policies in The Masters and Georgia’s Statute of Limitations:

Under Georgia law, the statute of limitations for a breach of insurance policy is six (6) years. However, in Georgia, the statute of limitations can be shortened by the insurance policy. For example, courts have held that a one year period for commencement of an action based on an insurance policy is valid and enforceable. A reasonable time period will be enforceable, but a shorter limitation than the statutory period for commencing suits is unreasonable if it raises a presumption of imposition or undue advantage in some way.

The policyholder’s brief noted a number of cases where Georgia upholds unambiguous language shortening the time period to file suit:

“No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within twelve months next after inception of the loss.” E. Tennessee Mortg. Co. v. U.S. Fid. & Guar. Co., 491 S.E.2d 333, 335 (Ga. 1997).

“No suit or action may be brought against us unless there has been full compliance with all policy terms. Any suit or action must be brought within one year after the inception of the loss or damages.” McCoury v. Allstate Ins. Co., 561 S.E.2d 169, 172 (Ga. Ct. App. 2002).

“No action can be brought unless the policy provisions have been complied with and the action is started within one year after the date of loss.” Suntrust Mortg., 416 S.E.2d at 322.

“No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within twelve months next after inception of the loss.” E. Tennessee Mortg. Co. v. U.S. Fid. & Guar. Co., 491

“No action can be brought unless the policy provisions have been complied with and the action is started within one year after the date of loss.” Jones v. Valley Forge Ins. Co., 382 S.E.2d 404, 405 (Ga. Ct. App. 1989).

“No suit or action on this policy for the recovery of any claim shall be sustainable . . . unless commenced within twelve months next after inception of the loss.” Gravely v. S. Tr. Ins. Co., 258 S.E.2d 753, 753 (Ga. Ct. App. 1979).

Rule number one when analyzing a Georgia loss is to mark the time deadline to file a lawsuit. Courts have upheld one-year time frames. Those times can come quickly, as the facts of this case demonstrate. Policyholders in Georgia need to be ready to hire legal counsel sooner because of these impending deadlines.

The court recited the important facts of the case:

In February 2018, First Solar began a 2,000+ acre solar project in Twiggs County, Georgia. Docs. 1 ¶ 1. Zurich issued an ‘all-risk Master Builder’s Risk Policy and project specific certificate […] to cover risk of loss and damage during construction’ of the project. Doc. 1 ¶ 2. The Twiggs County project was damaged during construction by five ‘serial heavy rain events [. . . which] caused significant water damage’ on December 13, 2019; February 5, 2020; February 13, 2020; March 3, 2020; and April 18, 2020. Doc. 1 ¶¶ 3, 35. First Solar filed timely claims for these events which totaled $13,403,576 in damages.

On July 11, 2020, Zurich made a $600,000 initial payment to First Solar for the rainstorm damages, pursuant to the policy’s ‘WATER DAMAGE*’ provision. In later correspondence, Zurich referred to the damage under the ‘FLOOD*’ provision instead. Zurich continued to investigate the claims through March 2021, more than a year after four of the five rainstorm events, and corresponded with First Solar throughout this process. On March 22, 2021, Zurich issued a letter that categorized the damages as ‘FLOOD*’ damages rather than ‘WATER DAMAGE*,’ claimed that a $2,500,000 deductible applied for each event, and stated that it would not pay any additional amount towards the damages. After this letter, First Solar and Zurich attempted arbitration. Following an unsuccessful mediation on October 7, 2021, First Solar filed its complaint on November 11, 2021, seeking indemnification for the losses related to its insurance claims. (docket cites omitted)

Zurich moved to dismiss, arguing that the Suit Against The Company clause limited the filing of a lawsuit to one year. However, the court noted that based on the allegations in the complaint, legal exceptions exist where Georgia courts will not allow enforcement of the provision. This discussion found in the Order is significant:

But ‘where the application of a contractual limitation would work a forfeiture of the policy benefit, ‘the court will strictly construe the provision against the insurance company and small circumstances will be sufficient to show a waiver by the company.’ Gilbert v. Southern Trust Ins. Co., 252 Ga. App. 109, 111, 555 S.E.2d 69, 72 (2001). The actions of an insurer can create a disputed question of fact as to whether the insurer ‘lulled the insured into a belief’ that the limitation was waived. Edwards v. Atlantic Ins. Co., 203 Ga. App. 608, 610, 417 S.E.2d 410, 413 (1992) (holding that there may be waiver ‘[i]f the insurer never denied liability, but continually discussed the loss with its insured with a view toward negotiation and settlement without the intervention of a suit’). However, ‘[m]ere negotiation for settlement, unsuccessfully accomplished, is not [the] type of conduct [. . . ] to constitute a waiver of the limitation defense.’ Stone Mountain Collision Ctr. v. Gen. Cas. Co. Of Wi., 307 Ga. App. 394, 396, 705 S.E.2d 163, 165 (2010). ‘Rather, ‘[t]o conclude that the policy limitations have been waived or estopped, there must be an affirmative promise or other act waiving the limitation[,] or an actual or constructive fraud leading the insured to believe the limitation [period] would be enlarged.’ Stapleton v. Gen. Acc. Ins. Co., 236 Ga. App. 835, 837, 512 S.E.2d 645, 647-48 (1999) (quoting Bowers v. Safeco Ins. Co. of America, 187 Ga. App. 229, 230, 369 S.E.2d 547, 548) (alterations in original) (1988).

In cases where Georgia courts have found waiver, ‘[e]ach involved investigations, negotiations, or assurances by the insurance company up to and past the period of limitation which would have led the insured to believe the limitation would not apply.’ Mod. Carpet Indus., Inc. v. Factory Ins. Ass’n, 125 Ga. App. 150, 151, 186 S.E.2d 586, 587 (1971). It ‘is not necessary that there be an actual promise to pay in order for the acts of the insurer to effect a waiver of the time limitation.’ Nee v. State Farm Fire & Cas. Co., 142 Ga. App. 744, 746, 236 S.E.2d 880, 882 (1977). If the facts show that negotiations led the insured to believe that a settlement would be reached without the need for a lawsuit, the insurer has waived the time requirement.

The court then noted the facts in the complaint which may allow the policyholder to escape the one-year limitation based on evidence to be presented later:

Here, Zurich provided an initial payment of $600,000 to First Solar in July 2020, and ‘First Solar understood throughout the claims process that Zurich was investigating and continuing to evaluate its position.’ Zurich maintained that it was ‘[s]till working on’ the claims as late as March 15, 2021—a week before it denied the claims and more than a year after four of the five rainstorm events at issue.

… Zurich’s initial payment and continued representations of investigation beyond the suit limitation period may be affirmative actions which constitute waiver.

Remember, safe is better than sorry. Note deadlines, especially statute of limitations deadlines, when first reading a policy following a loss. If the jurisdiction of the loss allows a shortening of the time to file suit, that date needs to be complied with. If allowed, get extensions in writing. Finally, do not wait until the last minute to get an attorney involved.

Thought For the Day

I love deadlines. I like the whooshing sound they make as they fly by.
—Douglas Adams
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1 First Solar Electric v. Zurich American Ins. Co., No. 5:21-cv-00408 (M.D. Ga. Mar. 10, 2022).